Government shutdown expected to have small price impact

Some commercial sources may provide (replace) much of USDA’s reported data. However, the general consensus is that commercial sources may not be as accurate, consistent, and unbiased as what USDA provides.

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Both domestic and foreign commodity buyers and sellers rely on daily, weekly, monthly, and annual USDA reports. The reports are essential for price discovery. Without USDA reports, the pricing function of the market is less efficient.

Some commercial sources may provide (replace) much of USDA’s reported data. However, the general consensus is that commercial sources may not be as accurate, consistent, and unbiased as what USDA provides.

The grain markets have been waiting months for the USDA October WASDE (World Agricultural Supply and Demand Estimates) report. The October WASDE is the first report that takes into consideration both USDA’s planted/harvested acreage survey and USDA/FSA’s crop insurance reports. The market knows that combining the survey and the crop insurances will result in changes to the planted and harvested estimates.

Two major commercial surveys (Bloomberg and Reuters) are conducted prior to USDA’s major reports. These commercial reports provide estimates that establish benchmarks for comparison to official USDA reports.

For example: Prior to the release of the October WASDE report (which has been delayed indefinitely), Reuters surveyed 27 market analysts relatively to U.S. corn and soybean production. Bloomberg surveyed 35 analysts.

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The average of the 27 Reuters analysts for U.S. corn production was 13.802 billion bushels. The range of the estimates was from 13.48 billion bushels to 14.15 billion. The estimates included yields (156.53 bushels per acre average), and harvested acres (88.142 million acres).

The average of the Bloomberg surveyed analysts’ estimates was 13.836 million bushels production, 157.0 bushels per acre production, and 88.005 million acres harvested. Reports like the Bloomberg and Reuters reports will be used instead of the USDA October WASDE report.

The grain market relies on USDA data and reports, but maybe not to the extent the livestock market does. Some livestock prices are calculated directly from USDA reports. The loss of the USDA reports forced U.S. meat packers and others to obtain data from commercial sources like Cattle Fax or Urner Barry. Even commercial data providers rely on some USDA data.

A free market economic system can and will survive without USDA. While different sources are found and adjustments are made, price risk will increase. Additional price risk will have a negative price impact, which is expected to be minimal.

Commercial sources can possibly replace USDA reports. The problem is that the commercial data is normally controlled by large market players. A major function of the USDA is to provide timely, unbiased data to everyone in the marketing system at the same time.

The USDA provides a “level playing field.” Without USDA’s data, most producers and small market players are at a disadvantage.

Without USDA’s reports, some buyers and sellers will leave the market resulting in less market activity and more price volatility. The time of highest price risk and volatility may be when the first USDA reports are released after the shutdown. These price movements will depend on how close private estimates are to USDA’s estimates.

The government shutdown will not stop the market from working. The free market system will find a source of data and a way to make the market price discovery system work.